Washington Insider--Monday

'Natural' Labels Get Regulators' Attention

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

USDA's FSIS Issues Non-GMO Labeling Guidance for Meat, Poultry

Approvals can now begin on what are termed "negative claims" -- food labels that indicate the meat, poultry or egg products inside do not contain bioengineered ingredients (GMO) or that the livestock used to create the product did not eat bioengineered feed.

A notice, issued by USDA's Food Safety and Inspection Service (FSIS) to provide guidance on such "non-GMO" labels, is the result of recent legislation requiring USDA to develop and implement a mandatory national bioengineered food disclosure standard within two years. That legislation also addresses "negative" claims, FSIS noted, providing that "a food may not be considered to be 'not bioengineered' or 'non-GMO,' or any other similar claim describing the absence of bioengineering in the food solely because the food is not required to bear a disclosure that the food is bioengineered under this subtitle." The guidance will be published in the Federal Register for public comment.

Given that legislation, FSIS said it will "allow use of the terms 'genetically modified organism' or 'GMO' in negative claims provided that the label or labeling is otherwise truthful and not misleading."

The agency gave several examples of approved labels, such as chicken "Raised on a diet containing no genetically engineered ingredients" of "Derived from beef fed no GMO feed."

Under prior policy, FSIS had not allowed the use of the terms "genetically modified organism" or "GMO" in negative claims, unless that claim was part of a third party organization certification (such as the "Non-GMO Project)" which contained the claim of not having GMOs.

The recently enacted legislation on GMO labeling has prompted FSIS to reconsider its position, the agency said.

However, FSIS it will retain the following requirements:

"Because FSIS does not have the ability to independently verify negative claims for ingredients or feed, FSIS has required establishments that make these claims to comply with standards established by a third-party certifying organization. FSIS currently requires that the third-party certifying organization's standards be publicly available on a website and the label or labeling disclose the website address of the third-party certifying organization. FSIS currently requires that the establishment demonstrate that its claims of third-party certification are truthful and not misleading. FSIS will retain these requirements in this guidance."

Vietnamese Official to Bloomberg BNA: TPP Not Open for Renegotiation

Renegotiating details of the Trans-Pacific Partnership (TPP) trade deal is not an option, despite calls by some U.S. politicians for such an action, Vietnamese negotiator Vuong Duc Anh told Bloomberg BNA.

Anh is deputy manager in Vietnam's Ministry of Industry and Trade's export-import department and negotiated the TPP rules-of-origin chapter for Vietnam. He said the agreement strikes the best possible balance among the interests of its 12 members.

Several lawmakers in Washington have said they won't vote for TPP and are holding out on behalf of U.S. corporations, including drug makers that want longer data exclusivity periods and tobacco companies who want the right to sue foreign governments.

Anh said he believes it is unrealistic to change the pact signed in February now that nations have finished years of "tough negotiations." Compromises were made, he said such as Vietnam's opposition to the yarn-forward rule, which allows zero tariffs on clothes made only with materials from TPP countries, a component the nation ultimately accepted. The rule will force the industry to make long-term domestic investments, Anh said.

"Even though there are difficulties for cutting and sewing factories, this rule promotes investment in dyeing and finishing," Anh said at the Asia Cotton & Textile Summit in Ho Chi Minh City.

A January report from the World Bank found that Vietnam's textile and garment exports would increase 28% by 2030 because of the TPP. Benefits for U.S. companies are expected as tariff reductions mean U.S. brands won't have to spend as much when importing clothes from Vietnam, Nguyen Binh An, secretary general of the Vietnam Cotton and Spinning Association (VCOSA), told Bloomberg BNA.

Anh said U.S. companies are saving money by moving from China to Vietnam, where labor costs are lower and where TPP would reduce duties. "The TPP just makes the process occur faster, in terms of moving the global supply chain," he said on the sidelines of the cotton conference. VCOSA estimates that 52% of Vietnam's cotton imports came from the U.S. in 2015. Anh predicted the number will increase under TPP.

One reason for the expected increase is a special arrangement between Vietnam and the U.S. Normally, countries that use a "most-favored nation" trade arrangement grant each other the best trading benefits granted to any other trading partner. But Vietnam will get duty-free access to the U.S. market for pants via a one-for-one mechanism, meaning the pants must be made of materials that are one part American for every one part that is from outside the TPP zone.

Washington Insider: "Natural" Labels Get Regulators' Attention

Clearly, the government further opened the door to market confusion when it required labels indicating GMOs, although USDA still has a couple of years to come up with details about how that is to be done. In the meantime, USDA is allowing labels that proclaim negatives -- that is, the absence of GMOs. The agency is knee-deep in rules about just how that is to be done since USDA will not inspect the products.

In addition, confusion continues to grow around use of the term "natural," which is used in a wide range of personal care products and other consumer goods even though, as Bloomberg recently noted, neither consumers nor regulators can define the term. The U.S. Food and Drug Administration recently spent more than a year trying to define "natural" for food and now has thousands of comments to sift through. It's unlikely we'll hear a report before next year.

The term "natural" has a built-in problem, Bloomberg said. Many consumers choose "natural" food rather than "USDA certified organics," which are seen as more expensive. The phrases consumers associate with natural labels on meat and packaged or processed food include no antibiotics, no artificial ingredients, and no GMOs, among other attributes. The problem is, "that's not necessarily the case," Bloomberg said.

"Those who don't want to do as much to get organic certification can kind of take a cheat and make claims on their products that don't really match up to what organic is," Urvashi Rangan, who leads Consumer Reports' analysis and advocacy on safety and sustainability issues, told Bloomberg. "That doesn't mean everybody who's using natural is distorting the truth, but it does mean that they can."

As a result, Consumer Reports' nonprofit policy arm has called for natural food labels to either be fixed or banned altogether, Bloomberg said.

Part of the problem is risk for manufacturers, according to Levi Stewart, a consumption sector analyst for the Sustainability Accounting Standards Board. "Companies realize that there's a lot of growth in demand for natural products," but that trend that is bringing increased scrutiny that can result in costly lawsuits and tarnished brand reputations."

The food industry faced more than 150 class action lawsuits in 2015, according to a tally from law firm Perkins Coie, which has defended General Mills, Costco and other companies. Most of the cases were over natural claims or false statements of fact, such as misstating calorie or fat content.

"It's like a securities case where somebody says this is a great investment ... but they also say you should read the prospectus," Thomas Doyle, a partner at Baker & McKenzie LLP, said.

In a new trend, manufacturers and retailers that want to differentiate their products are adopting the Environmental Protection Agency's recently revamped label for chemicals that are deemed safer for human health and the environment, Bloomberg said. For example, Seventh Generation, which makes natural laundry detergent, dish soap and other products told Bloomberg that for industries where there is no common definition of natural, "We've tried to be as clear as we can in our use of the term."

To Seventh Generation, "natural" means mostly plant-based, a claim backed up by the USDA's bio-preferred label. But some of its products also contain a small percentage of synthetic ingredients, which were the subject of a $4.5-million class action settlement proposed in July.

Some manufacturers are moving away from the use of natural labels. Roughly one-fifth of food products launched in 2013 to 2014 claimed to be natural, down from about 30% in 2009 and 2010, Bloomberg said.

"There aren't any easy answers except to not use these claims with wild abandon but to be more cautious and to use them sparingly when they're accurate," said Andrea C. Levine, who directs the advertising industry's self-regulatory body at the Council of Better Business Bureaus. Otherwise, words like natural and organic will "cease to mean anything at all if they're slapped on everything," she said.

It seems clear that the government is adding to the marketing confusion regarding the use of health-based claims. It is very hard to see how natural can be defined in terms of most food products, and it likely will be necessary to follow Consumer Report's suggestion and ban the term. Alternatively, as the Better Business Bureau fears, health-based claims will become weaker over time until they cease to mean anything at all, Washington Insider believes.

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